Full Judgment
2. We heard Shri Virag Gupta, learned D.R. and Shri K.K. Anand, learned Advocate. The learned D.R. submitted that the Respondents manufacture Paper and Paper Board and avail of Modvat Credit of the duty paid on the inputs used in the manufacture of their final products; that an intermediate product, namely, Bleach Liquor, falling under sub-heading No. 2828.90 of the Schedule to the Central Excise Tariff Act emerges during the manufacture of paper which is used in the continuous process of manufacture of paper; that the Commissioner (Appeals) in different Orders-in-Appeal has held that the bleach liquor is not marketable as it has a very short shelf life and it is not possible to take it out from the continuous process and market it; that the Department has not produced any evidence that the impugned product is marketable and that an article cannot be liable to duty merely because of its specification in the Tariff; that the Commissioner (Appeals) has also relied upon the decisions in the case of C.C.E., Baroda v. United Phosphorous Ltd. [2000 (117) E.L.T. 529 (S.C.) = 2000 (38) RLT 239 (SC)I and C.C.E., Raipur v. Orissa Concrete, 2001 (127) E.L.T. 178 (T) = 2000 (41) RLT 540 (CEGAT)].
3. The learned D.R., further, submitted that the bleach liquor is a product classifiable under sub-heading 2808.90 of the Tariff; that the captive consumption of the impugned product in the manufacture of writing and printing paper is not covered under Notification No.67/95-C.E., dated 16-3-1995 as the final product is chargeable to nil rate of duty; that the decision in the case of United Phosphorous is not applicable to the present matters as the issue pertained in that case relates to the intermediate product coming into existence in the course of manufacture of pesticides which cannot be equated with the bleach liquor which is having sufficient shelf life; that the impugned product is commercial calcium hypochlorite which has been explained separately in the Explanatory Notes of H.S.N. below Heading 28.09; that the very fact that a specific heading has been incorporated in H.S.N.indicates that the product is marketable throughout the world; that if the impugned product is not marketed by the respondents or cannot be marketed by them due to some factors like packing, availability of market, etc., it does not mean that the impugned product is not capable of being marketed. He relied upon the decision in the case of Plasmac Machine Mfg. Co. (P) ltd. v. C.C.E., 1991 (51) E.L.T. 161 (S.C.) wherein the Supreme Court has held that for articles to be goods, these must be known in the market as such or these must be capable of being sold in the market as goods. Actual sale in the market is not necessary, use in the captive consumption is not determinative but the article must be capable of being sold in the market or known in the market as goods. Reliance has also been placed on the decision in the case of Hindustan Polymers v. C.C.E., 1989 (43) E.L.T. 165 (S.C.) wherein the Supreme Court has held that "Manufacture under the Excise Law is the process or activity which brings into being articles which are known in the market as goods and to be goods these must be different, identifiable and distinct articles known to the market as such. It is then and then only that manufacture takes place attracting duty. In order to be goods, it was essential that as a result of the activity, goods must come into existence. For articles to be goods, these must be known in the market as such and these must be capable of being sold or being sold in the market as such". ".... In order, therefore, to be manufacture, there must be activity which brings transformation to the article in such a manner that different and distinct article comes into being which is known as such in the market". He contended that it is thus clear that it is not necessary that goods are transported and sold in a ready market, so long as the the fact of marketability stands proved.
4. The learned D.R. also referred to the decision in the case of Gujarat Narmada Valley Fertilizer Co. Ltd. v. C.C.E., Vadodara, 1999 (114) E.L.T. 909 (T), wherein the Tribunal has held that "Actual sale is thus not necessary for the purpose of marketability. M/s. Ghardia Chemical has mentioned the products as not marketable as no one else has adopted the technology. The Revenue has rightly relied on the judgment in I.O.C. case wherein the Supreme Court1 held that "They overlooked the fact that the goods were not marketable simply because they did not market them but used it themselves. This is not the same thing as not being marketable. The fact that it was marketable is proved by its utility for the purpose to which it was put." Finally, he relied upon the decision in the case of A P. State Electricity Board v.C.C.E., Hyderabad, 1994 (70) E.L.T. 3 (S.C.) wherein the Apex Court has laid down the test of marketability and has held as under : "The "marketability" is thus essentially a question of fact to be decided in the facts of each case. There can be no generalisation.
The fact that the goods are not in fact marketed is of no relevance.
So long as the goods are marketable, they are goods for the purposes of Section 3. It is not also necessary that the goods in question should be generally available in the market. Even if the goods are available from only one source or from a specified market, it makes no difference so long as they are available for purchasers." 5.1 On the other hand, the learned Advocate mentioned that bleach liquor is prepared in Pulp and Paper Mills for instant applications in bleaching; that lime is dissolved in water and milk of lime is prepared; that/thereafter, chlorine is passed through the solution and this solution is used to bleach the Pulp; that bleaching is done to increase the brightness by weakening or removing the colours of the material being bleached i.e. Pulp of unconventional raw material; that in other words, bleaching means that part of the pulp purification process which is intended to bring the raw material to desired whiteness; that thus aqueous substance is prepared fresh by maintaining temperature at desired level, He submitted that the Central Pulp & Paper Research Institute, Saharanpur (CPPRI), has made the following observation in its letter dated 10-7-99 addressed to M/s. Satra Paper Mills, one of the Respondents in these appeals : "..... the bleach liquor prepared at the Mill's site is dilute and the available chlorine is not as higher compared to commercially available bleach powder. Further, chlorine in the bleach liquor is not stable and since bleach liquor carry a major portion of water, CPPRI feels that marketing of hypochlorite in the form of bleach liquor prepared by reacting of lime and chlorine may not be commercially viable." 5.2 He, further, submitted that the various judgments of the Supreme Court highlight the fact that no duty is demandable unless the goods are proved to be marketable and the burden to prove that fact is upon the Department - Moti Laminates P. Ltd. v. C.C.E., 1995 (76) E.L.T. 241 (S.C.) and C.C.E. v. Ambalal Sarabhai Enterprises, 1989 (43) E.L.T. 214 (S.C.); that no material evidence has been brought on record to prove that the impugned goods is a marketable product; that the mixture prepared by them has a very short shelf life and it remains unstable; that it is to be prepared fresh and used promptly in the continuous process of manufacture before it loses its property; that the Explanatory Notes of H.S.N. is not with regard to impugned product. He relied upon the decision in the case of C.C.E., Raipur v. Orissa Concrete & Allied Industries, [2001 (127) E.L.T. 178 (T) = 2004 (41) RLT 540 (CEGAT)l wherein it has been held by the Tribunal as under : "It is well settled that before any goods be subjected to levy of duty even it finds mention in the Schedule appended to the CETA, two tests - one of manufacture and the other of marketability have to be satisfied. Therefore, the Revenue has to prove before levying excise duty on any goods that the same are not only manufactured product but have also got marketability." 5.3 He also mentioned that the Supreme Court has held in the case of Moti Laminates Pvt. Lid. that "It cannot thus be disputed that even if the resin produced by the appellants are resols as mentioned in Item 15A it could not be subjected to duty.... But even in respect of specified goods, it could be established that it was not marketable or capable of being marketed, therefore, no duty was leviable on it." 6. In reply the learned D.R. mentioned that the opinion tendered by the Central Pulp & Paper Research Institute mentions that it may not be economically viable to market the impugned product; that it does not say that it is not capable of being marketed.
7.1 We have considered the submissions of both the sides. The Apex Court has held in the case of U.O.I v. Delhi Cloth & General Mills Co.
Ltd., 1977 (1) E.L.T. (J199) that "to become "goods" an article must be something which can ordinarily come to the market to be bought and sold." Therefore, any goods to attract excise duty must satisfy the test of marketability. The Supreme Court emphasised this aspect in the case of South Bihar Sugar Mills Ltd. v. Union of India, 1978 (2) E.L.T.(J336) by holding that "to become goods it must be something which can ordinarily come to the market to be bought and sold and is known to the market." The Supreme Court has held in the case of Moti Laminates Ltd., supra that "any goods mentioned in the Tariff Schedule do not attract duty unless it is marketable or capable of being marketed. The Supreme Court observed as under: "The submission of the learned Counsel for the Department, therefore, that merely it is one of the items mentioned under Item 15A it was excisable to duty ignores the basic and primary test for excisability of duty." 7.2 Even in the decisions relied upon by the learned D.R., such as Hindustan Polymers, the Apex Court has held that "For articles to be goods, these must be known in the market as such and these must be capable of being sold or being sold in the market as such." In the present matters the Adjudicating Authority [In Appeal Nos.
E/2413-20/2003-NB(C)] has recorded a clear finding after referring to the manner of preparation of the impugned product that "it can be thus concluded that this mixture has a very short shelf life and on account of this it remains unstable. It is to be prepared afresh and used promptly in the continuous process of manufacturing before it loses its property. It is not possible to take it out from the continuous process and market it." The Revenue has not rebutted these findings by adducing any material or evidence and has not proved by referring to any technical literature or chemical analyses that the impugned product is stable and is capable of being marketed. The burden to prove marketability of a product is on the Revenue as held in the case of Cadila Laboratories P. Ltd. v. C.C.E., 2003 (152) E.L.T. 262 (S.C.).
Further, the Revenue, instead of bringing any material on record to prove the marketability of the impugned product has, as rightly observed by the Commissioner (Appeals), filed the appeal on the only ground that bleach liquor is mentioned specifically as a calcium hypochlo-rite in Heading 28.90 of H.S.N. This averment does not advance the case of the Revenue in view of the specific finding of the lower Appellate Authority that the product is unstable having short life and prepared afresh and used promptly in the continuous process of manufacturing. The Supreme Court has also held in Moti Laminates Ltd. that mere fact that the product is mentioned in the Tariff does not make it exigible to excise duty. To be excisable, the product must pass the basic and primary test of marketability. In Appeal No.E/3267/2003-NB(C), the Adjudicating Authority has held the impugned product to be marketable. However, even therein the ground for treating the-product marketable is the entry in H.S.N. only. No other reasoning has been advanced in the said Adjudication Order. The Revenue has thus not succeeded in establishing the basic test of marketability of the bleach liquor made by the Respondents for their captive use. We, therefore, reject all the appeals filed by Revenue.